Sawmill Profit Margins Fall in North America
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Sawmill profit margins have fallen substantially in North America over the past 12 months, with BC sawmills margins in the 2Q/19 being close to their lowest levels in 15 years.
Lower lumber prices and only small adjustments in sawlog costs in the 2Q/19, sawmills in North America saw their profit margins decline again after a short-lived improvement in the 1Q/19. Although margins have fallen quite substantially in the US South the past year, reaching a three-year low, they are still higher than the 15-year average as tracked by the WRQ.
Small changes in log costs together with lower income from lumber and residual sales have taken the gross margins for sawmills in British Columbia down to their lowest levels since the Global Financial Crisis back in 2009. In the 2Q/19, these margins are less than half of their ten-year average.
In the Nordic countries, sawmill profit margins (in US dollar terms) have increased over the past two years as a result of lumber and residual prices growing more than sawlog costs. From the 2Q/17 to the 2Q/19, gross margins in Finland and Sweden were up 4% and 11%, respectively. Export prices for lumber in both Finland and Sweden have fallen from early 2018 to 2Q/19.
As a result of substantially lower costs for sawlogs in Austria, sawmills have seen improved profits during 2018 and 2019. Despite declines in lumber prices during the second half of 2018 and in early 2019, gross margins in the 2Q/19 were at their highest level since the 2Q/08.
